We apologise in advance for being the bearers of bad news.
You see, usually we love being the centre of attention, but not always, like when it comes courtesy of the Australian Taxation Office, which has named the Hair and Beauty Industry as one of three industries it will be taking a better look at.
The ATO is justifying this enhanced focus by claiming that 25 per cent of hair and beauty businesses were a higher risk of not meeting their tax obligations. On average, 20 per cent of these businesses fail to lodge their activity statements on time, and almost 3000 businesses were significantly outside the key small business benchmark ratio for the industry, according to the ATO.
“According to the ATO the industry also has the fourth highest level of community concerns about potential tax evasion,” said Nigel Banks, Director, Bentleys NSW, an advisory, accounting and audit firm. “There are number of key triggers which will prompt a closer look from the ATO. These include businesses with an annual turnover of less than $2 million; businesses hiding income – cash or electronic payments; and a failure to register, keep records or lodge accurately.”
The ATO is particularly concerned with the incorrect classification of workers as independent contractors, and the resulting superannuation guarantee liabilities and PAYG withholding that comes with it.
We know we sound like the bringers of doom and gloom right about now, but really we’re just preparing you for what could come, and there are ways to be prepared. Firstly, become familiar with the ATO’s, ‘Building Confidence’ publication, launched last year, to better understand the organisation’s approach to compliance activities and reduce your salon’s tax risk. Also, pass the problem on to someone else.
“As a small business owner you should talk to your accountant to assess where you sit on the ATO’s risk matrix,” Mr Banks said. “Your company’s risk profile could be impacted by various historical factors such as untimely lodgement of tax returns and statements and late payment of tax liabilities.” Have an expert handle it, and you should be fine.